As an interim manager, setting your day rate is an important consideration. Set it too high and you will struggle to land assignments; Set it too low and you could be earning significantly less than your worth.
1.) Understand your market
It's important to have a good understanding of market rates for the services you provide. Bear in mind that the same service may pay different rates in different industries. Also factor in the scarcity of the services you offer and speak to your peers to gain more information on the going rate. A recruiter such as InterimManagementJobs.net can provide guidance on day rates.
2.) Length of Assignment
It is generally recognised that the longer an assignment the more willing interim managers are to be flexible on day rates. If you are offered a 12-month fixed-term engagement, you should consider dropping your rate slightly to reward the client for offering a longer-term arrangement. Or if you don't want to drop your day rate, perhaps you can offer more flexibility on the expenses you will claim.
The bain of an interim managers life is 'gap weeks' when they are not earning, so having a longer-term arrangement will reduce the number of ‘gap weeks’ you face, so in the long-run, you will make up the loss incurred by slightly reducing your rate. Bear in mind also, some clients may have an expectation to pay a 'pro–rata' salary if they offer a 12-month contract. If they won't budge on this, you may have to walk away.
3.) Type of Assignment
What does the client need you to do? What is the level of difficulty and complexity? If the company is in distress or the assignment is particularly difficult or complex or will require you to be working 12-hour days, factor this into your rate. Likewise, if you are required to enter a chaotic environment where you are effectively cleaning up a particularly messy situation, you may be justified in requesting a higher day rate.
In determining your day rate, think about how much competition you are likely to have for the assignment. Competition to interim managers comes on all fronts. There are other interim managers in the market, some of which may undercut you. This may be the interim manager who has just finished a long-term lucrative assignment so has the financial breathing space to be able to afford a drop in return for getting straight back on assignment, or it may be someone who is new to interim management who is happy to take a 'loss leader' to land their first assignment, or it may be an interim manager who has not been on assignment for a few months and has got to the point where they will drop their rate significantly just to get back on assignment. Competition may also come from Consultants, many of whom have re-defined their service offering to include elements of interim management.
If the assignment location is too far from home for a daily commute, you may wish to charge a higher 'all inclusive' rate than you would if the assignment was situated within commutable distance. This way, the client knows what they will be paying ‘all in’. The interim manager will use the extra amount added to the day rate to pay for accommodation Monday to Friday and perhaps meals and petrol. Alternatively, you could propose a Day Rate + Expenses which you would agree with the client at the outset.
6. Tax Liabilities
When setting your day rate, remember you will lose a proportion of your earnings to Tax and HMRC, so set your day rate to cover this. We recommend keeping a third of your earnings in a separate account, along with any VAT you charge, so that you can cover your Tax commitments and any unexpected tax bills.
7. Assignment Expenses
Think about the financial outgoings you will incur whilst undertaking the assignment and set your day rate accordingly. This is likely to include: accommodation from Monday to Friday, employee national insurance, employer national insurance, private healthcare, lease car, funding for sick pay and holiday pay, equipment, professional indemnity insurance, accountancy fees, travel expenses.
7. Do the Math
Treat being an interim manager as a business and plan for the year ahead. Maintain a spreadsheet detailing your: i.) Tax Liabilities, ii.) Assignment Expenses, iii.) Living Expenses. Weigh these liabilities and expenses up against your expected market rate to ascertain what your projected annual income and outgoings are. For annual income projections as an interim manager, assume that you will be 'on assignment' for 33 weeks of the year. This will enable you to work out what day rate you can charge and still cover your financial commitments. It will also enable you to work out the minimum day rate threshold you can realistically accept to enable you to meet your commitments, and anything offered below that threshold will be turned down.
Be flexible with your daily rate and think outside the box if, initially, you cannot agree a day rate with a client. For example, maybe they can agree to provide you with a payment at the end of the project when you have delivered as promised and met parameters agreed at the outset. Or maybe they can engage you for 4 days a week rather than 5 to save cost. Or perhaps you can provide them with a report detailing how much money you can save them to help justify your day rate. Bear in mind that all interims are operating within a challenging economic environment with a lot of uncertainty, so it pays to be flexible.
Monday Sep 9, 2019